Central Banks May Still Need Over 20,000 Tonnes of Gold

Central banks have been on a gold-buying spree since Russia's invasion of Ukraine in February 2022, and it seems like they still have room to keep buying. According to BofA, under-allocated institutions may need more than 20,000 tonnes to reach an efficient reserve allocation.

In the past three years, central banks' gold purchases have driven a bull market, with annual buying recently exceeding 1,000 tonnes. The firm estimates that on a global basis, central banks would need to purchase just under 2,300 tonnes to reach a threshold where gold accounts for 30% of total reserve assets.

However, the potential is much larger when excluding institutions already holding at least 30% of reserves in gold. BofA estimates that these remaining institutions would need to acquire about 20,333 tonnes to reach the target, representing more than two decades of purchases at recent rates.